Browse content similar to 16/08/2012. Check below for episodes and series from the same categories and more!
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to make it possible for dad. Tonight on Newsnight Scotland, more | :00:08. | :00:11. | |
trouble for the Royal Bank of Scotland, as they are subpoenaed in | :00:11. | :00:14. | |
the US over the fixing of interest rates. Could scandals at the banks | :00:14. | :00:19. | |
end up having a severe effect on the economy? | :00:19. | :00:22. | |
And we explore how both tenants and landlords fear losing out in the | :00:22. | :00:27. | |
housing benefit reforms. Good evening. Over the past four | :00:27. | :00:30. | |
years, the banks have given us many lessons in greed, incompetence and | :00:30. | :00:33. | |
recklessness, and in the process, they almost brought the world | :00:33. | :00:37. | |
economy to its knees. But being stupid and avaricious is not the | :00:37. | :00:39. | |
same as being criminal, and until recently, the bankers could console | :00:39. | :00:42. | |
themselves that while many of them were fired, by and large, they | :00:42. | :00:52. | |
:00:52. | :00:56. | ||
weren't accused of being crooks. The latest banking scandals have | :00:56. | :01:02. | |
changed all that. There have been accusations against HSBC of | :01:02. | :01:09. | |
allowing money laundering by good cartels. And Standard Chartered has | :01:09. | :01:14. | |
just agreed to pay the authorities in New York A $340 million fine for | :01:14. | :01:22. | |
breaking sanctions against Iran. At first sight, the ongoing inquiries | :01:22. | :01:26. | |
into manipulation of LIBOR may seem a more abstract and technical | :01:26. | :01:31. | |
matter. But it isn't. The London interbank offered rate, to give it | :01:31. | :01:36. | |
its full title, is the interest rate which determines how much | :01:36. | :01:40. | |
banks have to pay other banks to borrow money. It played a starring | :01:40. | :01:43. | |
role in the financial crisis, which started when interbank lending | :01:44. | :01:48. | |
seized up. The latest scandal, which erupted at Barclays Bank | :01:48. | :01:52. | |
early in the summer, concerns another aspect of LIBOR. The rate | :01:52. | :01:56. | |
is set each day by banks telling a committee how much they have to pay | :01:56. | :02:00. | |
other banks to borrow from them. The rates are then averaged out to | :02:00. | :02:06. | |
give the LIBOR rate. The allegation is that some banks lied about their | :02:06. | :02:11. | |
trades in an attempt to manipulate LIBOR. That is a big deal, | :02:11. | :02:17. | |
particularly in the United States, where there are almost 1 million | :02:17. | :02:21. | |
mortgages where what householders pay depends on LIBOR. But LIBOR | :02:21. | :02:26. | |
influence is much more than that. Something like 800 trillion dollars | :02:26. | :02:30. | |
of trades are dependent on it. That is a lot of people with a grievance | :02:30. | :02:34. | |
if it turns out that the rates were manipulated. Barclays has already | :02:34. | :02:39. | |
been fined, but it has been known for months that that was just the | :02:39. | :02:43. | |
start. RBS has already sacked people over the LIBOR scandal, and | :02:43. | :02:50. | |
has said it expects to face a huge fine in the UK. In fact, listing | :02:50. | :02:54. | |
major international banks are not involved in this would be quicker | :02:54. | :02:58. | |
than listing ones which are. I am joined from Edinburgh by the | :02:58. | :03:01. | |
financial journalist Ian Fraser, who is writing a book about the | :03:01. | :03:04. | |
Royal Bank for publication next year, and by Ray Perman, whose book | :03:04. | :03:10. | |
on the downfall of HBOS is out next month. | :03:10. | :03:15. | |
Ian Fraser, on these latest investigations, it is interesting | :03:15. | :03:20. | |
that they have been carried out by two of the states in America, | :03:20. | :03:25. | |
Connecticut and New York. Presumably, if they claim they are | :03:25. | :03:29. | |
acting on behalf of borrowers and investors in their state, then just | :03:29. | :03:34. | |
about every other state could follow suit? That's right, this | :03:34. | :03:40. | |
could be the tip of the iceberg for US investigations into LIBOR. There | :03:40. | :03:44. | |
seem to have been many different investigations are under way in the | :03:44. | :03:48. | |
US. There is also the Department of Justice and the Federal Bureau of | :03:48. | :03:53. | |
Investigation. There are a number of other federal bodies which are | :03:53. | :03:58. | |
looking into it. And the possibility of so-called class | :03:58. | :04:03. | |
actions, where individuals take action? To come fern macro, there | :04:03. | :04:08. | |
are about 280 lawsuits which are either under way or planned in the | :04:08. | :04:14. | |
US against banks which manipulate the LIBOR rate. Ray Perman, if you | :04:14. | :04:21. | |
are a bank, how do you react to this? It is starting to look as if | :04:21. | :04:29. | |
there are almost unlimited potential penalties to this. Royal | :04:29. | :04:32. | |
Bank, where Stephen Hester, the chief Executive, made a statement | :04:33. | :04:37. | |
on this a couple of weeks ago, the banks have been trying to say it is | :04:37. | :04:41. | |
a few individuals and it was never corporate policy at the back and | :04:41. | :04:47. | |
they didn't know about it. It was rogue traders. The Royal Bank has | :04:47. | :04:54. | |
fired four people. That will come unstuck if the prosecutors in New | :04:54. | :05:02. | |
York and Connecticut can prove that somehow, the bank knew about this. | :05:02. | :05:06. | |
In one of the cases of the executives far by the Royal Bank, | :05:06. | :05:09. | |
he is taking action for unfair dismissal against the bank, saying | :05:10. | :05:15. | |
everybody knew about it. It is fraught with problems for the banks. | :05:15. | :05:20. | |
Ian Fraser, the fact that Barclays agreed to pay a penalty, presumably | :05:20. | :05:25. | |
does not do them any favours when it comes to this any more than | :05:25. | :05:28. | |
standard chartered agreeing to pay a penalty does their case much | :05:28. | :05:33. | |
good? A think Barclays were hoping that if they collaborated with the | :05:33. | :05:43. | |
authorities, like UBS is also doing, ie to provide evidence, it believed | :05:43. | :05:46. | |
that by doing this, it would suffer less reputation of damage and | :05:46. | :05:51. | |
possibly receive lighter fines. It also negotiated immunity from | :05:51. | :05:56. | |
criminal prosecution in the US alongside that settlement. So | :05:56. | :06:01. | |
Barclays may have played this, with the benefit of hindsight, quite | :06:01. | :06:11. | |
:06:11. | :06:12. | ||
cleverly. RBS is not collaborating to the same extent. It is in a | :06:12. | :06:14. | |
dispute with the Canadian authorities about handing over | :06:14. | :06:19. | |
evidence, including e-mails and text messages. What is your sense | :06:19. | :06:23. | |
of how big this could be? Some are describing this as the tobacco | :06:23. | :06:31. | |
moment for the banks. Damian that when proof was provided of the | :06:31. | :06:36. | |
connection between lung cancer and cigarettes, tobacco companies were | :06:36. | :06:40. | |
opened up to multi-billion-dollar lawsuits. Ian Fraser, do you think | :06:40. | :06:45. | |
this could be a similar moment for the banks? It probably is. It is | :06:45. | :06:50. | |
the end of an era for the banks when they were basically given | :06:50. | :06:54. | |
carte blanche to do whatever they wanted by regulatory judicial | :06:54. | :07:02. | |
authorities. 27th June 2012 will be a moment in history when that era | :07:02. | :07:06. | |
of lax regulation, when banks believe they were above the law and | :07:06. | :07:14. | |
could do what they wanted, came to to be seen whether that will be the | :07:14. | :07:19. | |
case. Ray Perman, every other aspect of this financial crisis | :07:19. | :07:25. | |
that has been rolling since 2007 has had bad implications for the | :07:25. | :07:30. | |
economy. I wonder if this could, too. Many may not feel much | :07:30. | :07:34. | |
sympathy for the bags having to pay fines, but when those fines run | :07:34. | :07:39. | |
into billions of dollars, as they already are and could go much | :07:39. | :07:44. | |
further, it will not make it any easier for the banks to lend money? | :07:44. | :07:48. | |
No, and it will take the attention of the chief executives of banks | :07:48. | :07:52. | |
away from what they are supposed to be doing, which is lending money to | :07:52. | :07:57. | |
the economy. But the fines are only the tip of the iceberg. As you | :07:57. | :08:00. | |
mentioned, there is a huge number of people who could have lost out | :08:00. | :08:05. | |
from having the LIBOR manipulated. They could take action against the | :08:05. | :08:10. | |
banks. There could be civil actions rolling on after the regulatory | :08:10. | :08:14. | |
actions and after the judicial inquiries. So this is a Tobacco | :08:14. | :08:19. | |
moment, you agree? It could be hugely disastrous for the banks and | :08:19. | :08:23. | |
go on for a long time. In the short term, Ian Fraser, something will | :08:23. | :08:28. | |
have to be done about LIBOR, given that 800 trillion dollars' worth of | :08:28. | :08:36. | |
investments rely on it. The whole system, it seems, was based on the | :08:36. | :08:39. | |
possibility of trust, and it is no longer possible to trust the people | :08:39. | :08:49. | |
:08:49. | :08:50. | ||
LIBOR will have to be replaced, and an alternative system is being | :08:50. | :08:55. | |
sought out and one of those looking for it gave an announcement and | :08:55. | :08:58. | |
said it should be based on actual trains rather than imaginary ones. | :08:58. | :09:05. | |
That in itself would be a positive step. The trouble is that there are | :09:05. | :09:09. | |
a lot of legacy issues relating to LIBOR and Ray Perman has raised | :09:09. | :09:14. | |
those, possibly 800 trillion - a vast amount of derivatives and | :09:14. | :09:18. | |
contracts which depend on that rate. A lot of people who took out those | :09:18. | :09:22. | |
contracts believe they have been cheated and conned by the banks. | :09:22. | :09:28. | |
will have to leave it there. The UK Government is currently | :09:28. | :09:31. | |
overseeing the largest overhaul the welfare system for a generation. | :09:31. | :09:35. | |
One of the biggest target for the Department of Work and Pensions is | :09:35. | :09:38. | |
they amount they pay out in housing benefit. They are bringing in a new | :09:39. | :09:47. | |
system which will give new tenants some tough choices. | :09:47. | :09:52. | |
# I light the fire, you place the flowers in the bars. | :09:52. | :09:57. | |
Having a roof over our head is seen as a basic human right but what if | :09:57. | :10:02. | |
we cannot afford the rent for that room? | :10:02. | :10:12. | |
:10:12. | :10:17. | ||
# Our house is a very, very fine William that Salonen is probably | :10:17. | :10:20. | |
warranted one-bedroom flat and for the last decade, he has been his | :10:20. | :10:27. | |
mother's main carer when he moved into this flat. He is on | :10:27. | :10:30. | |
jobseeker's allowance so housing benefit paid his rent but he is | :10:30. | :10:34. | |
having no luck finding a job. received full housing benefit which | :10:35. | :10:38. | |
means I can afford the property at the moment but because I will not | :10:38. | :10:43. | |
have that for rent and housing benefit and will not be able to | :10:43. | :10:48. | |
afford it so I will have to find somewhere pretty sharp. So if you | :10:48. | :10:52. | |
cannot afford to stay here, that is just tough. What would you say to | :10:52. | :10:58. | |
that? I have just as much right as everybody else. It is not those | :10:58. | :11:06. | |
people's fault, it is just circumstantial. It is life, people | :11:06. | :11:09. | |
did put in these situations but it is not necessarily their choice. | :11:09. | :11:14. | |
Because of new housing rules being extended to those under 35 than in | :11:14. | :11:19. | |
private accommodation, by Christmas he will have to move or find an | :11:19. | :11:24. | |
extra �90 per month in rent. terms of young single person's for | :11:24. | :11:29. | |
example, previously under 25 he was access in another allowance, that | :11:29. | :11:35. | |
has been increased to under 35s so people in that ten-year age bracket | :11:35. | :11:39. | |
who have been quite used to having a one-bedroom property and being | :11:39. | :11:43. | |
able to access housing benefit for a one-bedroom property and now | :11:43. | :11:47. | |
suddenly they will only be able to access housing benefit for a shared | :11:47. | :11:51. | |
room property so they will have to move. It is not just those who are | :11:51. | :11:54. | |
renting privately on housing benefit to have got decisions to | :11:54. | :12:01. | |
make. For those renting from the council or housing association, | :12:01. | :12:07. | |
they may have to pay more. It has been nicknamed the bedroom tax and | :12:07. | :12:13. | |
if it is deemed to have a house larger than you need. If households | :12:13. | :12:18. | |
are deemed to be living in a property of one more urgent than | :12:18. | :12:22. | |
the DWP thinks they need, then the benefit will be cut. If they have | :12:22. | :12:28. | |
two more rooms, it will be cut by 25%. Because a large number of | :12:28. | :12:33. | |
tenant households will have no choice but remain where they are | :12:33. | :12:35. | |
because of the shortage of smaller properties, this means they will | :12:35. | :12:40. | |
have to find the short ball themselves in order to pay the rent. | :12:40. | :12:44. | |
First, this is not a bedroom tax. It is a tax against under occupancy. | :12:44. | :12:53. | |
And with a shortage housing for people desperately in need, I think | :12:53. | :12:56. | |
it is useful bat under occupancy is penalised. I do not think it will | :12:57. | :13:04. | |
frost people into dangerous areas. These are part of the Government's | :13:04. | :13:11. | |
welfare reforms, and they do not want any household earning any more | :13:11. | :13:19. | |
than �25,000 more in benefit. 30% by a work either for part time. | :13:19. | :13:23. | |
have the criticisms of the welfare systems were that quite a lot of | :13:23. | :13:27. | |
people, even if they were to go out and get work perhaps on minimum | :13:27. | :13:30. | |
wage, would not be much better off than they are in benefits. | :13:30. | :13:35. | |
Sometimes even worse. It is the kind of situation we have had. The | :13:35. | :13:40. | |
argument for the welfare reform that Iain Duncan-Smith is proposing | :13:40. | :13:44. | |
is that you would be more certain that he would be better off in work. | :13:44. | :13:48. | |
For everybody, they would get at least 20p in the pound more from | :13:49. | :13:52. | |
their earnings that they would be better off and to that extent, | :13:52. | :13:58. | |
nobody worse off. Under the new rules, tenants would received their | :13:58. | :14:03. | |
housing costs directly rather than cash go to the landlord. It is hard | :14:03. | :14:06. | |
for housing associations to raise cash and it is the housing benefit | :14:06. | :14:11. | |
they receive that gives the lender a sense of security. Consequently, | :14:11. | :14:17. | |
they have deep concerns. lenders see our sector as a good | :14:17. | :14:22. | |
risk because the revenue stream is likely stickier. Bringing | :14:22. | :14:26. | |
insecurity into that framework means the lenders will be worried, | :14:26. | :14:29. | |
it will affect the terms of availability of private finance and | :14:29. | :14:36. | |
traditional lenders... We think universal credit will worsen the | :14:36. | :14:40. | |
situation. Supporters of these changes say it is all about the | :14:41. | :14:45. | |
choices we make. I know that there are difficulties here but I know | :14:45. | :14:48. | |
that there are many, many people within the public and voluntary | :14:48. | :14:52. | |
sector who would like those who are on benefits to keep quiet and stop | :14:52. | :14:56. | |
interfering with the way that their benefits are administered. I think | :14:56. | :14:59. | |
we should take a more responsible attitude and trust people. That is | :14:59. | :15:05. | |
why I support the idea of paying benefits directly to the claimant | :15:05. | :15:08. | |
so it would encourage people to be more responsible about how they | :15:08. | :15:11. | |
lead their lives. I think we should protect that there should be a | :15:11. | :15:14. | |
proportion of people that get into serious difficulty and lots of | :15:14. | :15:19. | |
people who are a bit worse off and a bit more miserable. And I think | :15:19. | :15:25. | |
that we clearly have a housing system at the moment that is quite | :15:25. | :15:28. | |
dysfunctional, not investing in a way it should be, that is not doing | :15:28. | :15:33. | |
the economy any good at all. These will their reforms will not do | :15:33. | :15:36. | |
anything to help kick-start that side of things. The UK Government | :15:36. | :15:41. | |
says that the housing benefit costs have been spiralling upwards out of | :15:41. | :15:46. | |
control. They say like those in the private sector, those on housing | :15:46. | :15:49. | |
benefit will have to be far more realistic about where they can | :15:49. | :15:55. | |
afford to live. But critics believe the changes will damage the rented | :15:55. | :16:05. | |
:16:05. | :16:05. | ||
housing sector, closing the door on Tomorrow's front pages, starting | :16:05. | :16:09. |